RP’s $200-M currency swap with ADB hits snag

Negotiations between the Department of Finance (DOF) and the Asian Development Bank (ADB) on a proposed $200-million currency swap hit a snag yesterday as the two parties failed to agree on the pricing terms and other technical issues.

The ADB and the DOF have been working on the $200-million currency swap where the Philippine government would get dollars for pesos that it would give to the ADB.

The ADB would then lend the pesos to local banks that would, in turn, lend them to qualified borrowers in sectors picked specifically as beneficiaries of the lending program.

However, the scheduled formal signing today of the memorandum of agreement has been indefinitely deferred.

Finance Undersecretary Eric O. Recto said the documentation, which the government was not given enough time to review, created technical problems on the government’s side.

Another DOF official said pricing was also cited as one of the concerns since the ADB proposal was not perceived as "beneficial" to the government.

"Why would we accept (proposals) when the pricing is not right," the official said.

DOF Secretary Juanita D. Amatong said earlier that the government "don’t have a need for a currency swap and would keep on negotiating for the best terms."

In particular, she had pressed the ADB to pass on its preferential borrowing privileges to the government by lending the peso portion to local banks at concessional rates.

Amatong reasoned that since the ADB has a "Triple A" rating in the international credit market, it could pass on a portion of its preferential rates to the participating banks.

The government also said earlier it is in a position to dictate the terms in any cross-currency financing facility arrangement it may enter into, in the wake of several like offers from other sources. iThe DOF is in similar negotiations with other financial institutions such as the World Bank’s International Finance Corp. for a currency swap.

Such a deal would provide US dollar credit to the Philippines when necessary to supplement rescue funds and solve balance of payments problems.